Brazil's government has angrily demanded a retraction of tactless comments made by US Treasury Secretary Paul O'Neill.

The controversial comments about financial mismanagement - the latest in a string of gaffes made by Mr O'Neill - sent Brazil's currency spinning lower.

The situation is all the more embarrassing since Mr O'Neill is due to visit Brazil next week.

The storm broke after Mr O'Neill said Brazil must enact sound policies "so that [aid] does some good and doesn't just go out of the country to Swiss bank accounts."

It is now looking increasingly unlikely that Mr O'Neill will be welcomed in Brazil without an apology.

Unfriendly atmosphere

Brazil's president Fernando Cardoso has given instructions for the ambassador to be called in order to demand a retraction.

And Supreme Court President Marco Aurelio Mello told reporters that, as things stand, "the atmosphere would not be appropriate to receive Mr O'Neill."

Brazil's troubled currency lost more than 5% of its value on Monday as traders feared that Mr O'Neill's remarks would influence the International Monetary Fund's decision on whether to grant the country more aid.

Brazil's central bank is sending a delegation to Washington to discuss the release of funds with the IMF later on Tuesday.

Enron's genius

Mr O'Neill has also faced a barrage of criticism at home lately.

Many US investors and analysts feel he has neglected the US economy at a critical time.

He was touring Central Asia during the most turbulent week of share trading, defending himself by saying his presence would make no difference.

He also ran into difficulty during his recent tour of Africa, after saying foreign aid would not help alleviate poverty.

And, amongst his most often quoted remarks, he dubbed the collapse of Enron "the genius of capitalism".